You are working and running your business in Florida but have a California Employee do you need to pay taxes in CA?
Ding ding Ding – NEXUS (maybe)
What is this magical word mean?
Nexus is the term used to say you have an established business presence in the state
and each state has a set of rules that can trigger this Nexus status
If you are doing business in California, you are subject to their tax laws.
CA will consider you to be “doing business” if you meet any of the following:
➡ Engage in any transaction for the purpose of financial gain within California
➡Are organized or commercially domiciled in California
➡Your California sales, property or payroll exceed the following amounts:
1) CA sales exceed (either the threshold amount or 25% of total sales)
–in 2023 this is $711,538
2) CA real and tangible personal property exceed (either the threshold amount or 25% of total property)
–in 2023 this is $71,154
3) CA payroll compensation exceeds (either the threshold amount or 25% of total payroll)
–in 2023 this is $71,154
So if you do figure out that you indeed do have nexus, what does that mean?
Do you owe a ton in taxes? Does all your income get taxed to CA?
No! Not necessarily
But there is something called
Apportionment and allocation
A trade or business with income inside and outside of California may be subject to California apportionment and allocation rules.
Which means you study all your gross receipts and payroll and figure out the amount to apportion to the states and you will pickup a prorated amount of income that has a tax associated with it.
So if you have any questions on your business and if you have any filing or tax obligations, feel free to reach out to me and my team and we will help you get on the appropriate compliance journey
Contact Us Today!